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California Vehicle Tax: Everything You Need to Know

The California vehicle tax is 7.5 percent, but this simple number only gives you a rough idea of what you'll really pay for a new car. The state's overall sales taxes vary by location, which can make it tricky to estimate what you'll pay for something.

The California vehicle tax is 7.5 percent, but this simple number only gives you a rough idea of what you'll really pay for a new car. The state's overall sales taxes vary by location, which can make it tricky to estimate what you'll pay for something. Understanding both the state sales tax and the vehicle tax will help you budget better for this and other purchases in California.

California Sales Tax on Car Purchases

According to the Sales Tax Handbook, the California sales tax for vehicles is 7.5 percent. Of this, 1.25 percent goes to the applicable county government. Districts, cities, and other local government entities may collect additional taxes up to 2.5 percent. A $50 emissions testing fee applies to the sale of the vehicle as well. Other fees such as registration, title, or plate fees may also apply to California car purchases.

California Documentation Fees

Everquote reports that dealerships can charge a documentation fee to cover the cost of completing the paperwork associated with a vehicle sale. These costs are charged separately from other DMV fees and sales taxes.

Fees vary by dealership. In California, the average documentation fee is $80, which is the maximum amount the dealership can charge by law.

Other Taxes and Fees Applicable to California Car Purchases

State and local sales taxes are not the only expenses you will incur when purchasing a vehicle in California. There are several additional taxes and fees that apply to car purchases in the state of California, which typically add up to $2441 for a new car. These are typically collected by the California Department of Motor Vehicles rather than the California Board of Equalization and include:

Registration Fee: Up to $500

Plate Transfer Fee: $65

All About California Sales Tax

Navigating California sales tax can be difficult. The California Department of Tax and Fee Administration (CDTFA) administers fee and tax collection in the state. According to the CDTFA, 25 different sales tax rates are charged across California's cities.

California Sales Tax

According to SmartAsset, in California, the minimum sales tax allowed on any purchase is 7.25 percent. Of this, 6 percent goes to the state and the remaining 1.25 percent goes to county and city funds. This is one of the highest state taxes in the U.S. Complicating things further, the minimum sales tax is only charged in about a quarter of California cities. Individual cities and counties may increase these taxes, and often do.

Sales Tax States elaborates, explaining that Los Angeles County has a 9.5 percent sales tax, making this the lowest tax you can pay within the county. However, individual cities within the county can increase this. In downtown Los Angeles, the sales tax is 9.5 percent, but nearby Culver City has a sales tax of 10.25 percent.

Where Does California Sales Tax Money Go?

California's 6 percent sales tax is divided among several places:

3.9375 percent is used to finance the state government.

1.0625 percent funds public safety services through a local revenue fund.

Additional taxes that are charged per locality may support local initiatives such as public transportation programs or efforts to battle homelessness. These funds are used differently in each location.

What's Taxed and What Isn't?

Most goods and services are taxed in California. Exemptions include:

Groceries

Plants or seeds for food

Livestock

Prescription drugs

Some exemptions apply only in certain situations, such as those on hot drinks and bakery goods. Farm machinery is subject to only a partial sales tax.

The purchase location determines many sales taxes. This is true of vehicles. The sales tax on a vehicle is based on the location where you register the car, not where you purchase it. Check state and local laws for more information on the correct taxation for that area.

Do You Pay Sales Tax on a Private Party Used Car in California?

Vehicles sold through private party sales in California are subject to a use tax. Similar to a sales tax, this is collected for the storage, use, and consumption of personal property which includes vehicles.

There are some instances where you may be exempt from a use tax. There is no use tax if:

The sale occurs between family members related by blood or adoption (between parent, child, grandparent, grandchild, siblings, spouses, or domestic partners)

The car is inherited

The car's ownership is transferred as part of a court order

The car is a gift (not traded between individuals or transfer of contracts)

Do California Vehicle Taxes Apply to Trade-Ins and Rebates?

California's vehicle taxes apply to the vehicle's full price before trade-in credits or rebates are applied. Many dealerships offer credits for trade-ins that decrease your out-of-pocket cost for the vehicle. For example, you may get a $5000 credit for a trade in that you can apply toward a $15,000 car. You will only pay $10,000 for your vehicle, but the state still taxes you for the full $15,000 purchase.

Similarly, a dealership may offer a manufacturer rebate or other incentive that reduces the price of your vehicle. As an example, you might enjoy a $1000 rebate for the $15,000 car. You will only pay $14,000 for the car, but you will still pay taxes on the full $15,000 sticker price.

How Do You Calculate California Car Tax?

According to Cars Direct, taxes on vehicle purchases in California vary by city and county. The California DMV website provides specific tax rates by zip code or county. To determine your exact tax rate, you must enter:

The type of car you're purchasing (new vs. used, as well as type since energy-efficient vehicles are often eligible for tax breaks)

Date of purchase

Purchase price

City, county, and zip code where you live

Once you've calculated your sales tax, you should add registration and other fees as well as insurance expenses. This will give you a comprehensive idea of how much you'll really pay for a new car.

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